Value Chain Analysis : Business World 's Most Valuable Tools Essay

Provides analysis of customers to serve. For example, in order to widen the gap and create a competitive advantage the value chain shows what products appeal to certain customer segments. A value chain can be utilized to adjust the scope of operations.

The value chain is a concept developed by recognized Harvard business management expert Michael Porter in his book "Competitive Advantage (1985)." It breaks up the various elements of producing and

Value chain analysis helps the companies to identify the areas in the production processes where unnecessary and less productive steps can be removed to improvise them. The value chain analysis of Sony is carried out in following lines.

28. Value chain analysis views a firm as a series of business processes that each adds value to the product or service.

Value chain analysis is a useful tool which help the organisation to find ways to create maximum value for customers.

Value chain analysis is an influential instrument for executives to recognise the crucial actions within the company which create the value chain for that association, and have the potential of a maintainable competitive advantage for a business.

The Value chain portrays all the internal activities that a firm undergoes to convert inputs into outputs. Consequently, value chain analysis is when a firm recognizes the primary and support activities that contribute in adding value to the final product, then analyze these activities in accordance to the firms strategy of either reducing costs or increasing differentiation (Jurevicius, 2013).

The concept of Value Chain was introduced by Michael Porter which involves a process of adding value to a product or service at every stage. A value chain may exist within one firm or may extend over an expanded supply chain that includes various firms. It enables to identify the Primary and Secondary activities which can increase the value to end customers and thus facilitate business organisations to gain a margin over input cost.

Value Chain Analysis is a tool that used to identify the company’s primary and support activities that can creates value for the product to the customers, to analyze the activities to be cost leadership or differentiation strategy and eventually to develop a competitive advantage and create shareholders value. By simply explaining of creating value, a company takes raw inputs (timber) and to add “value” (designing and manufacturing) to them by converting them into something of worth to people for paying money for it (furniture).

According to Peppard and Rylander (2006), the concept of a value chain has been a dominant position in the strategic analysis of industries. Kaplinsky and Morris (2001) state that the value chain describes whole process of activities: conception of product or service, diverse phases of production, delivery to final consumers, and customer service. After the initial proposal of

Harvard Business School invented the concept and believed that competitive advantage cannot be understood by looking at a firm as a whole. The disadvantages of a value chain could include a company becoming too segmented and result in a construed conception of the company’s most important values. Thus, the importance of a successful value chain lies within the linkage of the different processes it incorporates. All in all, the value chain can provide organizations a strategic framework for managing the hundreds of activities that go into making the final product.

According to the wiki dictionary, “a value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market” (Michael E, 1985). Having a value chain is very important for companies nowadays because value chain analysis can assist companies in becoming more competitive in the intense market. Globalization decreases the time and cost between companies in different countries. It also provides convenience for companies and customers. If Chinese customers took an order on Amazon.com, they might receive the goods in less than a week including completing the economical transition. Briefly speaking, the value chain analysis is a strategy that analyzes the inner

One will see differences in value chains of firms within the same industry sometimes, as the variance from company to company depends on differences in strategic approach and whether or not the firms have the same breed of vertical supply linkages. Analysis, being constrained by the aspects mentioned above, means the strategic options of a company are limited. Additionally, the value chain can only provide valid analyses to firms which operate within a single industry, defined by common technology (Haslam et al, 2000) (see Figure 1, p. 1). Further, if the company at hand is pertinent to this form of analysis, only the processes from acquiring any raw material to finished manufacture are involved.

One of the main goals of a business is to gain advantage on their competition. One way to gain advantage is to conduct a value chain analysis, which studies what an organization can do in order to generate a competitive advantage, while providing the greatest value to their consumers. The analysis involves identifying each part of the chain and seeing where improvements can be made from a production standpoint or a cost perspective, to guarantee that consumers get the most bang for their buck. It can benefit a business in the long run, when consumers are getting the most out of a product for the cheapest cost value to consumers. “The value chain analysis looks at each of the activities in the value chain to determine what steps are necessary and which are not in an attempt to boost the company’s bottom line.” (Brooks,

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